What You Should Know About the GAO? Hint, its Alot
Sy Goldberg, CPA, MBA, JD | November 16th, 2008
In August 2008 the General Accounting Office (GAO) issued a Report to the Committee on Finance, U.S. Senate regarding Individual Retirement Account compliance issues.
The GAO Report is in excess of 50 pages and discusses the complexities of complying with the Individual Retirement Account (IRA) tax rules. I will help you understand just what this means for you.
According to the Report about 51 million taxpayers held $3.3 trillion in IRAs as of the end of 2004. In addition, the GAO Report indicated that total assets in IRAs as of 2007 was more than assets held in either employer-sponsored defined contribution or defined benefit plans.
The GAO Report discusses the complexity of the rules governing IRA contributions and distributions. It also discusses the various penalties that apply to IRA contribution and distribution rules as well as the compliance problems for taxpayers, IRA custodians, financial planners and advisors as well as the burdens on the IRS in enforcing the IRA rules.
One of the more interesting comments in the GAO Report regarding distributions states in part follows:
On the distribution side, the interviewees said that taxpayers get confused over which exceptions for early withdrawals are not subject to penalties, in part because the exceptions differ for employer plans. Older taxpayers may make mistakes in determining when they must start minimum distributions and calculating the correct amounts, and the required minimum distribution rule poses a growing challenge as the population ages and increasing amounts of pension assets are rolled over into IRAs.
The GAO Report is comprehensive and will be further discussed from time-to-time in other articles.
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Tags: general accounting office, individual retirement account, ira, Sy Goldberg, tax law, tax planning, Taxes, taxpayers
About the Author: Sy is a senior partner in the Jericho law firm Goldberg & Goldberg, P.C., is Professor Emeritus of Law and taxation of Long Island University. He has authored guides for the American Bar Association and the America Institute of CPAs on retirement distribution rules. In addition, you may be interested in a consumer’s version entitled “Inherited IRAs: What Your Family Needs To Know” published by JKLasser.com
